- This trading strategy with five stocks from those of ETF (XLK), mainly with a dividend yield greater than that of the S&P 500 index, produces much higher returns than XLK.
- The universe from which stocks are selected holds point-in-time, the S&P 500 technology stocks of FactSet’s Reverse Business Industry Classification System and some electronic payments industry stocks, similar to XLK.
- The model ranks the stocks of this custom universe with the Portfolio 123 “Greenblatt” ranking system and selects periodically the highest ranked stocks which also satisfy the stipulated yield requirement.
- From 1/2/2009 to 9/8/2020 this strategy would have produced an annualized return (CAGR) of 31.8%, significantly more than the 20.1% CAGR of XLK over this period.
The analysis was performed on the on-line portfolio simulation platform Portfolio 123.
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- This is a copycat trading strategy based on the quarterly 13F filings of five hedge funds.
- The model holds the top 20 consensus picks from a group of five hedge funds.
- Changes in the holdings occur only every three months when the end-of-the-month 13F filings becomes public information.
- From Jan-2007 to May-2020 this strategy would have produced an annualized return (CAGR) of 27.1%, much more than the 7.8% CAGR of the S&P 500 ETF (SPY).
Rational for a Copycat Strategy
Research from Barclay and Novus published in October 2019 found that a stock selection copycat strategy that combines conviction and consensus of fund managers that have longer-term views outperformed the S&P 500 by 3.80% on average annually from Q1 2004 to Q2 2019.